Self-storage statutes are being amended more frequently than ever. The national and state self-storage associations have invested a lot of money to lobby for updates and push against unfriendly laws that are damaging to the industry. It’s important for facility operators to keep track of these changes because they can often require modifications to your rental agreement or operational procedures.
In 2021 alone, at least 13 states have modified some portion of their self-storage statutes. This doesn’t even include bills that haven’t passed during this legislative session or measures introduced from outside the industry that seek to negatively alter our regulations. Though each passed bill is ultimately unique, many recent updates address one or more of the following:
- Lien-sale advertising requirements
- Delivery of lien-sale notices to tenants
- Online lien sales
- Value limitations in rental agreements
- Towing of stored vehicles
- The sale of tenant insurance
If your state statute has been modified over the last several years, you need to compare your lien-sale procedures and rental agreement against the current law to ensure any necessary language additions or removals have been made. For example, some states have given self-storage operators permission to send lien notices via email; but they may also require some sort of formal disclosure and acknowledgement by the tenant before you can legally send notices that way. Likewise, when states allow you to use online auctions for lien sales, they may require additional language in your rental agreement or sale notice, so tenants understand sales are no longer conducted on property.
Let’s look more closely at two of the most prevalent legislative changes of which you should be aware.
One of the biggest changes in self-storage legislation has been to lien-sale advertising requirements. Many states now allow facility operators to publicize their sales somewhere other than the local newspaper. However, in nearly all cases, the revised statute includes a requirement that the method used be “commercially reasonable” to draw a certain number of people to the sale. In some cases, the attendance requirement is simple because the statute defines the word “attend.” Other states are much less clear.
It’s important for you to understand that you may now be obligated to prove that you had X number of “independent bidders” at your sale, which can be tricky. First, you have to meet the required number, and second, you have to prove you had enough who were independent of each other. That isn’t all. If you operate in one of those states where the word “attend” isn’t clearly defined within the state law, you need to figure out what that means. If you aren’t advertising your lien sales in a local newspaper, these are the things you have to do to prove your method was commercially reasonable.
If you send your own self-storage lien notices, you must make sure they’re up to date and reflect any changes to your state law. For example, if you host your auctions online rather than at the facility, your notice may need to inform the tenant of that fact. If you’re towing a vehicle in lieu of a sale, your default notice may need to reflect that, too.
Keep in mind that if you’re using the lien notices that come with your facility-management software, it’s unlikely that those documents are compliant with your state statute or updated as changes are made to law. These sample notices are typically designed to be mere placeholders where you should insert your own legally compliant, modernized verbiage.
Where to Look for Updates
Be aware that your state self-storage statute isn’t the only place to look for legislative updates. It won’t necessarily contain all regulations that pertain to your business.
For example, self-storage statutes rarely contain the language that allows operators to sell tenant insurance with a limited-lines license. Such provisions are normally placed in the insurance statutes. Similarly, some states—New York, for example—don’t include the lien-sale advertising requirement in the self-storage lien law, instead placing it in a completely different section of the state statutes. Other laws can control things such as what you’re able to charge a tenant for submitting a bad check as payment. These are just a few examples in which state regulations outside the local self-storage statute can affect your business.
If you have questions or concerns, contact your attorney to ensure you’re aware of the latest and most important statutory developments. This will help protect your self-storage business and keep it in compliance with the law.
This column is for the purpose of providing general legal insight into the self-storage field and should not be substituted for the advice of your own attorney.
Jeffrey Greenberger is a partner in the Cincinnati law firm of Greenberger & Brewer LLP. Licensed to practice in Kentucky and Ohio, he focuses primarily on representing the owners and operators of commercial real estate, including self-storage. His website, selfstoragelegal.com, contains legal opinions and insights as well as an article archive. To reach him, call 513.698.9350; email [email protected].